Frazier sells stake in incubator

Typically, venture capital firms invest in business incubators with the hope that the emerging companies they spin out turn into multi-million dollar enterprises.

Investing early, after all, can reap huge rewards.

That was the logic at Frazier Healthcare Ventures, which along with several other deep-pocketed investors pumped more than $10 million into medical device incubator Synecor in 2000.

But now the Seattle venture capital firm, along with Delphi Ventures, is in the process of selling its stake in Synecor to Ascent Biomedical Ventures and Synergy Life Science Partners. The deal, which has yet to close, was first reported by VentureWire.

Nathan Every, a general partner at Frazier Healthcare, told the P-I today that they decided to sell their stake because they received an attractive valuation.

“It was a rich enough offer that it made sense for us to take that offer,” said Every. “At some point when you have the chance to take some money off the table, you have to consider it.”

Every said it was a “pleasant surprise” to make money directly off the incubator in addition to the companies in the portfolio.

So far, Synecor has produced one exit — the sale of BioStent to Guidant in 2003. Two other Synecor portfolio companies — Menlo Park, Calif.-based BaroSense and Research Triangle Park, North Carolina-based InnerPulse — have raised large rounds of capital. Frazier will retain a stake in both companies.

What Frazier is giving up is the right to invest in the first rounds of future Synecor spin outs, though Every said he is hopeful to continue a strong relationship with the firm’s stable of emerging medical device companies.

“If they need more capital, hopefully they will turn to us because we are friends and colleagues,” he said.

Every also noted that Frazier recently started its own internal incubator under the direction of Julian Nikolchev, a venture partner in the firm’s Palo Alto, Calif. office.

“That is really where we are going to focus our incubation activities,” he said.